ACTELIS NETWORKS INC

Actelis Networks, Inc. operates in the market for cyber-hardened, rapid-deployment networking solutions for wide-area applications, including federal and military, state and local government, intelligent traffic systems (ITS), and additional IoT environments such as utility and rail, as well as Multi-Dwelling Units (MDU). The industry is shaped by three significant global shifts: the accelerating rise of AI adoption demanding expanded computational resources at the network edge, a shift to defense and advanced defense technologies driven by geopolitical tension and the need for critical modernization of networking, and the increasing criticality of cybersecurity as a pillar of operations. These trends receive vast budgets and require rapid progress, favoring the use of existing infrastructure. The company's solutions use a combination of newly deployed fiber infrastructure and existing copper and coaxial lines, which its patented technology can upgrade to fiber-grade performance, creating a hybrid network that is cost-effective, secure, and quick to deploy.

The company believes its hybrid-fiber solutions have a significant competitive advantage in copper performance, seamless fiber-copper-coax integration, overall system cyber-hardened design, and highly cost-effective value compared to alternatives. Primary competitors named in the filing include Cisco, Rad, Nokia, Siemens, and Belden in the broader space, with more specific competitors in ITS being Moxa Technologies, FlexDSL Telecommunications AG, EtherWAN Systems, Inc., and Belden Inc., and in the MDU markets, InCoax, Positron, and ReadyLinks. The company believes it has a strong reputation for providing reliable, high-performance products and that its brand recognition, developed over more than 20 years, and credibility with esteemed customers such as the U.S. Department of War, constitute an entry barrier for competitors.

The company generates revenue primarily from the sale of its networking hardware, software, and services. Revenue is derived from a mix of product sales, which include hardware and embedded software, and separate sales of its Element Management Systems (EMS) software, support and maintenance services, and its MetaShield AI-powered SaaS solution. The company's primary customer segments are IoT customers, including federal and military, state and local government, and ITS, as well as legacy Telco customers. For the years ended December 31, 2025 and December 31, 2024, IoT customers in the aggregate accounted for approximately 73% ¹ and 72% ² of revenues, respectively. The company derives a significant portion of its revenues from a limited number of customers; for the years ended December 31, 2025 and December 31, 2024, the top ten customers in the aggregate accounted for approximately 62% ³ and 74% ⁴ of revenues.

The company's product portfolio is built around several key families. The Gigaline 800/900/5000/6000/9000 Series are advanced, software-managed, temperature and cyber-hardened, layer 2 and layer 3, hybrid-fiber-copper-COAX switching devices at multi-gigabit speeds of up to 10Gbps ⁵, covering ITS and MDU markets. The MetaLight ML500/600/700/Series are cost-efficient, compact, and hardened Ethernet switches for long-distance hybrid-fiber networks. The MetaShield product group, introduced in 2024, is a cyber-security, cyber-aware networking solution, an AI-powered, asset intelligence and threat management platform that is a cloud-based Software-as-a-service solution. The ML2300 Aggregator Series is designed for large, medium, and small aggregation/operating and control centers, capable of connecting hundreds of locations or elements. The XR239 Series is a repeater installed on long copper lines that can extend connectivity range to long distances, in some cases up to 100Km ⁶. The company also offers its Advanced MetaLIGHT/Gigaline EMS software for remote management, monitoring, and configuration of installed equipment.

The company's solutions also include its patented multi-layered 'Triple Shield' technology, which includes information coding for resilience and security, multi-line information scrambling, and an additional 256-bit ⁷ hardware-based real-time encryption of data running over fiber, coax or copper. The company has invested nearly $100 million ⁸ over the years to develop this technology. In 2024, the company successfully completed the certification of its product lines for Federal Intelligence Protocol Standards (FIPS) 140-2 ⁹ and was approved by the DoW's Joint Interoperability Test Command (JITC) for interoperability and cybersecurity. In February 2026, the company deployed the next generation of FIPS standard requirements in its product portfolio (140-3) ¹⁰. The company's products are utilized within networks deployed by cities such as the City of Los Angeles, the District of Columbia, and notable entities such as Highways England, the Federal Aviation Administration, and the U.S. military, including the Air Force, Navy and National Guard.

During the fiscal year ended December 31, 2025, the company executed several significant capital events. On July 2, 2025, the company closed a private placement, issuing 162,602 ¹¹ shares of Common Stock and warrants for total aggregate gross proceeds of approximately $1 million ¹². On September 3, 2025, the company closed a warrant inducement transaction, receiving aggregate gross proceeds of approximately $1.6 million ¹³ from the exercise of 427,020 ¹⁴ existing warrants. On September 27, 2025, the company entered into a Common Stock Purchase Agreement with White Lion Capital, LLC, providing the right to require White Lion to purchase up to $30,000,000 ¹⁵ in aggregate gross purchase price of newly issued shares. Concurrently, the company entered into a private placement with White Lion for total aggregate gross proceeds of approximately $850,000 ¹⁶. On December 19, 2025, the company closed a public offering, selling shares and warrants for aggregate gross proceeds of approximately $5 million ¹⁷. The company also received a formal notice from Nasdaq on December 3, 2025, that it had regained compliance with the Bid Price Rule. However, on February 4, 2026, the company received a written notice from Nasdaq indicating the Staff had determined to delist the company's securities due to failure to maintain compliance with the Bid Price Rule, and the company has requested a hearing.

For the fiscal year ended December 31, 2025, total revenues were $3.671 million ¹⁸, a significant decrease from $7.760 million ¹⁹ in the prior year. The company reported a net loss of $8.261 million ²⁰ for 2025, compared to a net loss of $4.374 million ²¹ in 2024. The operating loss for 2025 was $7.185 million ²², compared to an operating loss of $3.758 million ²³ in 2024. The company had negative cash flows from operations of $7.694 million ²⁴ in 2025, compared to $6.538 million ²⁵ in 2024. As of December 31, 2025, the company had an accumulated deficit of $52 million ²⁶ and cash on hand (including short term bank deposits and restricted cash equivalents) of $4.4 million ²⁷.

A primary growth vector is the expansion in the federal and military market. The company is focusing its sales efforts on the Programs of Record (PoRs) in the Department of War (DoW), aiming to become designed into several of them as the default technology. The company upgraded its capabilities in Federal and Military sales and marketing by hiring a Chief Revenue Officer, Americas and a Director of Federal sales. The company believes the recent 2025 outages in Air Traffic Control drove an urgent approval of over $12 billion ²⁸ of modernization budget for the FAA networks, and that US military base modernization budgets in 2025 were $37 billion ²⁹ as part of a model projecting the Federal Defense program to grow to over $850 billion ³⁰ in 2029.

Another major growth vector is the expansion in cybersecurity and recurring revenue models. The company launched MetaShield, a SaaS, AI-based cyber-security and operational continuity monitoring and mitigation software platform. In 2025, the company started to market vulnerability scanning, analytics and monitoring services to customers. The company believes the global cyber-security market is projected to grow from approximately $240 billion ³¹ in 2024 to nearly $500 billion ³² in 2033, according to Grandview research. The company also sees growth in the MDU market, which it believes is in dire need for multi-Gigabit connectivity, and notes the Broadband Equity program (BEAD) has allotted $28 billion ³³ already to all 50 states to modernize and provide high-speed reliable internet.

The filing does not contain a specific margin and cost outlook with exact figures for future periods.

The company outsources its product manufacturing to contract manufacturers located in Israel and Taiwan. The company believes it can add and/or replace its contract manufacturer if necessary, typically within three to six months ³⁴. The company's raw material consists of electronic chipsets, FPGA components, modems, and other electronic and mechanical components. The company assists its contract manufacturers in acquiring components that are harder to find and secures components designated to be close to end of life. As of December 31, 2025, the company had approximately 51 ³⁵ employees and contractors, of which 39 ³⁶ were full-time employees.

The company's capital allocation strategy is focused on funding operations and growth. The company has invested nearly $100 million ³⁷ over the years to develop its patented technology. The company's research and development expenses for the year ended December 31, 2025, amounted to $2.638 million ³⁸. The company has a stock repurchase program authorized by the Board, initially for up to $1.0 million ³⁹ of outstanding shares, which was expanded on March 18, 2026, such that the maximum aggregate purchase price under the program will now be $1.5 million ⁴⁰. As of the date of the Annual Report, $50,000 ⁴¹ worth of repurchases have been made. The company does not plan to pay dividends on its common stock in the foreseeable future.

A significant headwind is the company's history of net losses and negative cash flows from operations, which raises substantial doubt about its ability to continue as a going concern. The company experienced a net loss of $8.3 million ⁴² and $4.4 million ⁴³ for the years ended December 31, 2025 and 2024, respectively, and had negative cash flows from operations of $7.7 million ⁴⁴ and $6.5 million ⁴⁵ for those same periods. The company's financial condition raises substantial doubt as to its ability to continue as a going concern.

A key constraint is the company's ongoing compliance with Nasdaq listing requirements. The company has received multiple delisting notices from Nasdaq for failure to maintain the Minimum Shareholders' Equity Requirement and the Bid Price Rule. On February 4, 2026, the company received a written notice from Nasdaq indicating the Staff has determined to delist the company's securities. The company has requested a hearing, but there can be no assurance that it will be able to regain compliance. Additionally, on January 26, 2026, Nasdaq filed a rule proposal that would permit the immediate suspension and delisting of a company if its market value of listed securities remains below $5 million ⁴⁶ for 30 consecutive business days, and as of the date of the Annual Report, the company's market value of listed securities is below $5 million ⁴⁷.

The company faces material risks related to its financial condition, which raises substantial doubt about its ability to continue as a going concern, evidenced by a net loss of $8.3 million ⁴⁸ and negative cash flows from operations of $7.7 million ⁴⁹ in 2025, and an accumulated deficit of $52 million ⁵⁰. A second critical risk is the potential delisting of its common stock from the Nasdaq Capital Market, as the company has received multiple delisting notices and on February 4, 2026, Nasdaq determined to delist the company's securities for failure to maintain the Bid Price Rule, with the company's market value of listed securities being below $5 million ⁵¹. A third material risk is the company's dependence on a limited number of customers, as its top ten customers accounted for approximately 62% ⁵² of revenues in 2025, and the loss of any significant customer would adversely affect the business. A fourth risk is the company's reliance on outsourced manufacturing and key component suppliers, with the company having experienced problems in the past with procurement and component end-of-life, which could hurt profitability and the ability to deliver products on time. Finally, the company's operations are subject to geopolitical risks in Israel, where its research and development facilities are located, and the ongoing armed conflicts and regional instability could harm its operations.

Management's message emphasizes the company's position as a market leader in cyber-hardened, rapid-deployment networking solutions, focusing on the significant market opportunities presented by the accelerating rise of AI adoption, the shift to defense and advanced defense technologies, and the criticality of cybersecurity. The strategic priorities emphasized for the period ahead include expanding in the federal and military market by focusing on Programs of Record (PoRs) in the Department of War, expanding in cybersecurity and recurring revenue models through the MetaShield SaaS platform and vulnerability monitoring services, and leveraging the United States' Bipartisan Infrastructure Law and BEAD program. Management also highlights the company's unique hybrid fiber networking solutions as a key differentiator for cost-effective and rapid deployment.